A businessman passes before a share prices board in Tokyo. Japanese shares closed up 2.11% yesterday.
AFP/Tokyo
The European Central Bank’s hint at fresh stimulus measures for the stuttering eurozone economy sent Asia stock markets and emerging currencies surging yesterday, while the euro held on to losses.
Regional investors were set to end another week on a positive note, extending an October rally that has been fuelled by hopes for more monetary easing from key central banks, including in the US, China and Japan.
The gains come after global markets suffered their worst quarter in four years during July-September, owing to worries about the Chinese economy.
After its latest policy meeting on Thursday, the ECB unveiled no new measures, but its head Mario Draghi said: “The degree of monetary policy accommodation will need to be re-examined at our December meeting.”
The comment inflamed talk the bank will ramp up its already vast bond-buying scheme—essentially printing more cash—in a bid to fan chronically weak inflation and kick-start torpid growth.
With the prospect of more euros flooding the market, the single currency plunged Thursday to $1.1111 and ¥134.10 in New York, well down from $1.1339 and ¥135.65 in Asia earlier in the day.
And yesterday in Tokyo the unit bought $1.1115 and ¥134.15.
It also fuelled a rally in equities, with Frankfurt and Paris surging more than 2% while all three main indexes on Wall Street also enjoyed healthy gains. The upbeat mood filtered through to Asia as Tokyo ended 2.11% higher, Sydney gained 1.67% and Seoul tacked on 0.86%. Hong Kong added 1.34%. Shanghai closed 1.30% higher.
“Mario Draghi and his elves at the ECB practically confirmed there will be an early Christmas present in order for the European economy on 3 December,” Evan Lucas, a market strategist at IG, said in an e-mail to clients.
“In short, all options are on the table for the ECB, also meaning the Bank of Japan and the Fed are now live events as well.”
Speculation the Federal Reserve will put off an expected interest rate hike until next year has gained traction over the past month as bank policymakers fret over the weak global economic outlook.
A growth slowdown in China and ongoing troubles in Japan’s economy have also exacerbated talk that those countries will soon announce more measures, feeding a rally in financial markets.
Traders are keeping an eye on China, where the country’s leaders are preparing for a top-level policy meeting—or plenum—next week, with talk of measures to reform the sprawling state-owned sector to try to improve efficiency.
